European Union may be Malawi’s only hope

Listening to Finance Minister Goodall Gondwe, you get the sense that hope is getting dimmer that bilateral donors will ever return with direct budgetary support with or without a positively active International Monetary Fund (IMF)-supported programme. And when you listen to Treasury spokesperson Nations Msowoya, Capital Hill appears to believe that direct aid from multilateral bodies such as the European Union (EU) and from International Financial Institutions (IFIs) such as the World Bank, the African Development Bank (AfDB) and the European Investment Bank might still be pouring in, at least for as long as the fund continues to give us a clean bill of fiduciary management health.

It is instructive that government is banking on multilateral partners—not bilateral ones—to respond to the IMF’s latest positive signal.

With the death of the Common Approach to Budgetary Support, it looks like members of the disbanded grouping use different performance assessment frameworks, making it hard to harmonise green light or red light decisions on budgetary support.

There is also a general belief that while multilateral aid, just like bilateral support—both core and earmarked contributions—is also tied to a kaleidoscope of accountability arrangements, there is growing evidence that aid recipients increasingly prefer multilateral to bilateral aid.

Several reasons are cited for this. First, some studies show that multilateral aid outshines bilateral aid in terms of effectiveness.

Second, multilateral aid tends to target poorer countries with greater needs and has better development outcomes.

Third, multilateral aid is less political as multilateral agencies are not as obsessed on national interests as bilaterals.

On the other hand, most bilateral donors give aid according to their strategic interests rather than addressing the economic needs of the poorest countries.

It is always interesting to see that big donors such as Britain and the United States continue to pour aid into countries with questionable democratic credentials, traits of dictatorships and with little efforts at reform, yet they withhold aid to poor countries such as Malawi at the flimsiest of excuses.

But those who paint a rosy picture of multilateral institutions, especially that they are better because of their objectivity and allocation of aid according to economic needs and governance criteria rather than strategic interests, assume that all multilateral bodies act independently; that there is no long finger that feeds them, whose strategic interests they cannot bite.

For big players in the multilateral bodies and IFIs, Malawi is not that strategically important and if they believe Malawi does not deserve it; it may not get aid from some multilaterals.

Princeton University’s Christina J Schnider and Jennifer L. Tobin of George Town University and Brookings Institution, in their working paper of titled ‘Intent Coalitions and Multilateral Aid: Is the EU (European Union) Bad for Africa? of January 2010, suggest that the political economy of multilateral aid allocation may largely be about the geostrategic agenda of the most influential Member State.

From colonial guilt to war on terror to securing votes at the United Nations, foreign policy objectives are a major motivation for providing aid; hence, a multilateral body may end up promoting the values of its largest or most influential benefactor.

This is why the US is so influential at the World Bank where country assistance strategies clearly reflect Washington values and some of the bank’s largest disbursements go to countries where America has massive geopolitical or other strategic interests.

This view was strengthened by the US General Accounting Office which, in 1996, noted: “The [US] has played a leading role in shaping the World Bank’s agenda, and Bank projects often support US foreign policy goals.”

It may also explain the agenda-setting role that France plays within the AfDB.

This is also a position that Michelson Institute for Development Studies and Human Rights, in its paper ‘Powerful donors and foreign policy: The role of multilateral financial institutions’, advances.

It says: “The gain to an influential donor which is able to make the World Bank or other similar multilaterals adopt this donor’s view on an issue can be substantial. In that case, all the contributions from the other member nations will also stand behind the multilateral organisations ’ stance on the particular issue, and recipients may feel compelled to comply with this massive counterpart. As a result, influencing the multilaterals may give much more leverage to a donor’s foreign assistance in the foreign policy arena than pursuing the same goals bilaterally with the same amount of aid.”

But not all multilateral institutions are suffocated by the homogeneity of member States’ strategic interests.

The EU, as a heterogeneous multilateral, is largely insulated from the influences of powerful members.

Indeed, as Schneider and Tobin note in their paper, the EU has shown independence from the influence of member States by constantly defending the interests of poorest countries against tilting aid policies towards wealthier countries with more strategic benefits at the expense of poor ones.

The reason the EU is able to do this is simple.

Even if you count Germany’s rapidly expanding influence in the union, the EU has so many major players that no one Member State can assert itself unilaterally, according to Schneider and Tobin.

So, if Capital Hill still has any hope left for aid, especially from multilaterals, the EU must be on top of the list. n